LENEXA, Kan. – U.S. Central FCU posted its final financials for 2008 yesterday, showing the massive $1.2 billion charge for December for its troubled mortgage securities, creating a $1.1 billion loss for the year and casting doubt over the future of the central bank for credit unions.
The massive charge wiped out more than $700 million in retained earnings and left the corporate credit union for corporate credit unions with negative $463 million in retained earnings, which is expected to be paid by transferring corporate members paid-in-capital to U.S. Central’s reserves.
U.S. Central was still sitting on almost $10 billion of unrealized losses at the end of December, even after the $1.2 billion charge. Those losses are believed to have increased in the two months since then.
Member corporates, several also challenged by growing losses on their mortgage securities, have been withdrawing funds from U.S. Central at an accelerating pace, with total assets down by $12 billion, or 27% for 2008, and by 13%, or $4.9 billion, in just the last three months of the year.
NCUA has moved to strengthen U.S. Central with a $1 billion infusion of capital and agreed to guarantee all deposits in the troubled corporate, which will be paid for by a special assessment on all federally insured credit unions.
At the end of 2008, U.S. Central’s investment portfolio had a fair market value of $23.8 billion, reflecting $9.4 billion of unrealized losses. Those losses are centered on the corporate’s holdings of private label MBSs, but are also spread through securities backed by credit card, student loan, auto and commercial mortgages loans.
